It Costs $134 Million To Make $80 Million In Pennies
Guess it's time to start making 'em out of plastic. Transcript, inside...
USMINT: They're still warm can you feel it?
60MINUTES (VO): Every year, the US Mint turns out 8 billion shiny new pennies. Using high-tech presses that operate faster than the eye can see, stamping out Abe Lincoln on blank pieces of metal.
USMINT: We're making four pennies per second. We're making a couple million pennies per day.
60MINUTES (VO): And, says US Mint director Ed McMoy, despite inflation, despite their lowly status, 8 billion pennies still add up to-
USMINT: 80 million dollars. That's real money.
60MINUTES (VO): Trouble is, to get 80 million in pennies, the government spends 134 million dollars. And, to produce 1.3 billion nickels, as the mint did last year, costs 124 million, even though the coins are worth only about half that much.
60MINUTES: It's weird economics when it really comes down to it, isn't it?
USMINT: Well, from our perspective at the United States Mint, it's unsustainable. You can't sustain losses on pennies and nickels and expect to be a viable organization that benefits the American people.
60MINUTES: How did we get in this fix?
USMINT: You know, coins are made out of metal, and worldwide demand for copper, nickle, and zinc have dramatically increased over the last three years. That's what's primarily driving up the costs of making the penny and nickel.
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Comments:
Just another reason to go to a cashless society - it would be cheaper. ;)
there goes my plan of holding the world's supply of pennies for a monopoly
This is why I melt all my pennies and extract the metals.
Oh, and thank you for posting the transcript, Ben. It helps those of us with lousy hearing to understand what they're talking about. Kudos to you! :)
Just think how much worse it would if they were still using almost pure copper for the pennies.
Y'all realize that nickels and pennies are used hundreds and hundreds and hundreds of times each, therefore making this story absolutely pointless, right?
The reason the penny is here to stay is because of the numerous tax laws in every single state. Try paying a 6% sales tax without pennies.
what i dont get is why it would be bad for it to cost more to make an amount of currency then the currency is worth. Its not like the government sells it. Or am I wrong? I can see though its kind of silly to spend that much money on pennies, something most ppl wouldnt miss.
Back to the wooden nickel it is then. No wait, not eco friendly. Back to the recycled paper, wooden nickel sponsored by IKEA.
@dregina: Yeah but they're making the pennies that replace the ones that go out of circulation because they're lost or destroyed or in water jugs propping doors open. And just because a penny, or a nickel or a dollar gets used over and over again doesn't change its worth. Each time it gets used it's traded for something that's equal in worth, so the value of the currency just gets shifted around a lot, but it never changes. (this is of course not taking into account inflation).
You know the saying: It takes money to make money.
@darkened:
For starters I would suggest a law being passed that begins the phaseout of pennies - merchants aren't required to provide penny change, only nickel change, and a bill for goods after tax is rounded up to the nearest nickel for cash purchases, with the difference going to whichever local entity is charging that sales tax.
In other words, a loaf of bread, a gallon of milk, and a carton of eggs would cost $11.35 instead of $11.31, with the 4 cent difference going to the state.
Of course, if you pay your bill with a check, check card, credit card, WIC card or whathaveyou, the exact amount can be debited.
@darkened: Why not mandate that the price marked on an item include all taxes? We are so backward here.
I see 2 options: move to paperless currency (credit/debt cards) or get rid of all small change and simply round everything to the nearest dollar. You can't buy anything for less than a buck anyway so we make the dollar our smallest unit of currency. Hell, with inflation (Thanks, W!) we'll soon need a $500 and %1000 bill just to buy a loaf of bread.
What does it matter what it costs? They just print up more money to pay for it. That's the advantage of being the mint.
"60 Minutes went on to a field trip to the US Mint and found out that to make $80 million worth of pennies, it costs the government $134 million."
Does anyone know if that figure of $134 million is just the metal price, or the price of both metal & manufacturing cost (cost of machine, energy to run machine, cost of human to watch machine, etc...)
Also I would be for getting rid of the penny. All cash transactions to be rounded to nearest $.05 - all electronic activity can still be to the nearest cent.
Also, does anyone know if it would be cheaper if they changed they type of metal used. Is there a cheaper metal that can be used & still hold up like copper and such?
Haha, now the gov't realizes that they are paying more for raw materials than they can sell them for, just like every other business. Suckers.
Maybe now they'll report a little more honestly on inflation rates??
We MUST keep the penny for two critical reasons:
(1) if we switched to nickels as lowest monetary unit it would, believe it or not, significantly increase inflation, because the price of many goods and services are increased over time in pennies and now would have to switch to nickels; and
(2) foreign exchange would have to increase by nickels instead of cents which would also make markets less fluid!
We should all be using Pickle's Nickles anyway.
One other obvious point that they completely missed in the Sixty Minutes show (much to my horror as a macroeconomist):
while it costs more than a penny to create a penny that same penny is used hundreds (or perhaps even thousands) of times before it goes out of circulation or gets misplaced. same thing with nickels and quarters. just look at the dates on your coins! so it still makes economic sense to create pennies and nickels. it is just for purposes of creating a market of exchange.
I remember when I grew up in England we had half pennies.
My grandma who lives in the Scottish isles still calls me a "silly hapeth". I will not be able to call my grandkids sillty hapeths!
i like the penny! so all of you who are too good for your pennies, give them to me. or i guess you could just keep throwing them on the ground. i'm not above picking a penny off the ground.
As a macroeconomist, you should know that, from the gov'ts point of view, that initial transaction is the only one that matters, as it is using that new currency to purchase (even if indirectly) goods and services.
and btw, there are pennies out there that are worth thousands!!!!
How about this..... we get rid of the dollar bill & replace it with the dollar coin. The money saved from not having to print new dollar bills could be used to offset the costs of making the penny & nickel.
I think I read once that a dollar bill lasts for approx. two years in circulation before it becomes ragged & worn so much that it needs to be replaced, while a dollar coin will last approx twenty years in circulation (if not lost or destroyed). THAT is a BIG difference!
Also... as a guy who is in the metal detecting hobby, I'd LOVE the opportunity to find dollar coins at almost the same frequency that I find quarters. :D
@InThrees:
Instead of the 4 cents going to the state, they can use those wonderful boxes called "computers", and compute a refund check, or put on a savings card for me all of the pennies they owe me. Rounded down to the nearest nickel of course, thereby starting the process all over again.
Why not just make money worth something again. I am really sick of this inflation tax.
I don't see pennys going away anytime soon, but the story comment about making them out of plastic... maybe not literally but maybe we should start looking at alternative materials. I'm pretty sure most vending machines don't take them anyways, so relatively little harm to swap out the materials.
[obvious] Though preferably not a petroleum product, as we know how the material worth of that has a tendancy to shoot up for no particular reason as well. [/obvious]
Is this Microsoft's fault or Best Buy's fault? I'm getting my threads mixed up.
i love when they take these tiny little numbers AND MAKE THEM GIGANTIC SO PEOPLE NOTICE THEM!
do the math: 8 billion pennies costing $134 million equals a per unit cost of 1.675 cents. that's right: it costs a little over 1 1/2 cents to make 1 cent. wow! thanks for that smoking gun!
if you really want to get serious about saving money in terms of currency, abolish the dollar bill. cost savings of $120 - $180 million per year if dollar notes were switched to dollar coins.
It's the evil FED and NAFTA and the CFR all in their evil plans of controlling the world trough inflation! Somehow...
@JustAGuy2: I think the Obamaniacs are going to demand his face on the one dollar bill if he is elected.
The best part: "Oooh, they're still warm!"
Failing monetary policy is so tantalizing!
@laserjobs: lol. amen! after reading many of your witty, humorus comments, i'm putting you in my friends and following your comments!
@Papi Bear:
I disagree. The phase out would be implemented at the sales transaction point, not the pricing point. For example, a pipe company could still charge .21 per foot of PVC. But when the buyer buys 3 feet for a total of .63, he just pays .65.
The business would round every transaction to the nearest 5 cents. The consumer would benefit for .01 and .02, the business would benefit for .03 .04. It all evens out in the end, and nobody has to carry pennies.
Plastic pennies? Wouldn't that be worse for the environment?
Some are in favour of eliminating pennies, but that will only lead companies to increase prices and by rounding off upward.
Here's a better idea: create a two cent coin, a "twenny", and gradually phase out the penny. Sure, might add short term cost, but it would cost less per coin, and would not measurably change the way change is changed. (I couldn't resist that bit.)
As well, the current coin metal could be melted down and recycled into the new coins, offsetting the cost of replacing by not purchasing new metal. After the switch, the glut of metal on the market would mean lower prices for printing new twennies and other coins.
Isn't it possible that we could switch to an entirely plastic (debit card) economy and that would prevent people from skipping on their taxes since the government could monitor every transaction? If we replace the federal income tax with a national sales tax I think we would need to switch exclusively to plastic. It would also avoid money laundering.
@Papi Bear: how exactly do you pronounce "obamaniacs" anyway? is it like oba-maniacs or is it obama-niacs? that second one's tough to say, but probably more correct.
Interestingly enough, it's Illinois folks (like Obama) who, along with the nickel manufacturers, fight to keep the penny. Land of Lincoln and all that.
You spelled, "nickels," incorrectly.
Why don't we just keep manufacturing copper and nickel, 1 and 5 cent pieces, and back the currency with precious metals like we used to. It would solve more problems than just the cost of coinage.
It must have been a long weekend. The word "pennies" looks to me a lot like "penises" at first glance. In fact, this whole comment thread is a lot better if you substitute each occurrence that way!
I just want to note something for everyone suggesting we round up to the nearest nickel on cash sales and do the exact amount on debit/credit sales.
This will hurt the poorest people the most. The people least likely to have a checking account or a credit card will have to pay more. The people who are on the ragged edge of poverty and using check-cashing places to get money because they can't get a bank account will be the ones paying more for goods & services.
This makes poor economic and social cents.
I just watched this last night. A lot more interesting than I would have thought. Like the part where it's revealed that a prominent advocate for keeping the penny, who argues that this would only hurt the poor, actually owns the company that maufactures the die cast that the US Mint used to make the penny. Scandalous!